Survey finds debt shrinks as people ‘hunker down’
Saskatchewan residents were less likely to report new sources of debt in June than they were three months previous, before the COVID-19 pandemic hit the Prairies.
The data come from a pair of telephone surveys conducted by the University of Saskatchewan’s Social Sciences Research Laboratories (SSRL) in early March and mid June.
In each survey, 400 Saskatchewan residents were asked about their personal debt and their views on the economy.
Of those who participated in the June survey, six per cent said they had a little or a lot more personal debt when compared to a year earlier. That’s down from the March survey when 17 per cent of respondents said they had a little or a lot more personal debt than they did a year ago. In both March and June, 32 per cent of respondents said they had a little or a lot less debt than they did a year ago.
Respondents were asked whether they had taken on specific forms of new debt in the past year. When compared to respondents from March, respondents from June were less likely to have incurred debt from new or increased credit card balances, new or increased lines of credit and new or increased vehicle loans or leases.
Joel Bruneau, the department head of economics at the University of Saskatchewan, says the results are not surprising.
“What you get in every recession is people sort of hunker down,” he says. “Instead of going out and having nice holidays and spending money, you sit on your money because you don’t know what’s going on.”
When people have lost their jobs or fear that may happen, they may be less inclined to spend money. Some Saskatchewan companies that sell big-ticket items reported seeing fewer sales this spring — though numbers seem to be rebounding.
Alex Cruder, the CEO and co-founder Curbie, an online vehicle retailer based in Saskatoon, says people simply were not buying cars in the weeks after the Saskatchewan
government declared a state of emergency.
“There was about four weeks — and that went from the middle of March to about the middle of April — where I’d say that sales were virtually non-existent. There was possibly one, but it was not very much,” he recalls.
But Cruder said business has since picked up. With the economy opening up and the federal government creating programs that help businesses keep employees on the payroll, people have felt less cautious about making big purchases like a car, he says.
Similarly, Kevin Farebrother, general manager of Hyundai of Regina, told Postmedia in June that sales fell by 40 to 50 per cent in March, but are now picking up.
And Doug Ferguson, the president and owner of Moose Jaw RV & Marine, said business slowed down when the pandemic hit. He says things started improving when the weather warmed up, perhaps a factor of more people looking to take vacations closer to home.
In addition to people being cautious about spending because of the economic environment, restrictions in place because of the pandemic have affected what is available to purchase.
Most retail stores and restaurants in Saskatchewan closed in late March and have been opening slowly and with restrictions as the province moves through the phases of its Re-open Saskatchewan plan.
Travel has also been severely restricted, with the Saskatchewan government still recommending against non-essential travel out of the province. Both the Saskatoon John G. Diefenbaker International Airport and Regina International Airport have reported a 98 per cent drop in passengers this spring due to COVID -19 restrictions and people’s reluctance to travel.
The SSRL survey data are consistent with what’s being seen across the country. According to a June report from Equifax Canada, average non-mortgage debt dropped 0.5 per cent in the first quarter of 2020. An Equifax Canada consumer survey found that younger adults aged 18 to 34 reported the biggest decline in credit card balances since the pandemic began.
The SSRL surveys suggested no significant differences in people taking on new debt from mortgages, personal loans or payday loans in June compared to March.
On the mortgage front, the Saskatchewan Realtors Association says the real estate market in the province did not take as big a hit as expected. As of June 11, 4,975 homes had sold year-to-date in Saskatchewan, down from 5,414 in 2019. That eight-per-cent drop is not as steep as the 70 to 75 per cent decline the SRA had feared for April.
Two in five Saskatchewan residents surveyed by the SSRL — 41 per cent — said in June they expected the economy to be much or a little bit better within a year, up from 25 per cent in March; a sense, perhaps, that some people believe things can only get better.
“People have sort of readjusted their expenditures, but the net effect is that expenditures will rebound. And they’re rebounding now, but they’re rebounding slowly because of a degree of uncertainty,” Bruneau says.
“We have a plan and the province had a plan and it seems reasonable so maybe people are just going like, ‘Well, you know, it could have been a lot worse.’ ”
The data from the SSRL were collected as part of the Taking the Pulse initiative, which involves researchers from the University of Saskatchewan’s Social Sciences Research Laboratories calling a representative sample of Saskatchewan residents four times a year and asking for their views on hot-button topics in the province.
Both March and June surveys are accurate to 4.9 per cent 19 times out of 20.